Multi-product Dynamic Break-even Analysis and Its Application

Based on analyzing the defects and drawbacks existed in applying the traditional break-even analysis method to long-term investment project decisions, this article holds up an idea that the time value of money must be considered for any break-even analysis on long-term investment projects, builds a mathematical model for dynamic break-even analysis considering the time value of money at the time of multi-product production, and analyzes its application in multi-product production by way of example. It arrives at a conclusion that at the static break-even point, a project may have potential losses, but the dynamic break-even point means that the project will get exactly the basis profit, and is real "break-even". Being operable, objective and practical, the mathematical model built for multi-product dynamic break-even analysis can improve the scientificity and dependability of project investment decisions.